TEN COMMON
PITFALLS
AVOID THEM AND HOW TO
PAYROLL
BUSINESS PERFORMANCE GUIDE
Running a business involves a litany of
moving parts, and successfully handling
payroll duties is just one of them. With so
much going on, even within the payroll
process itself, it’s easy for business owners to
slip up from time to time. Not paying your
employees or satisfying your governmental
obligations, however, is not an option.
Keep an eye out for these frequent
payroll faux pas:
Reporting and depositing taxes in a timely manner to federal, state and local taxing agencies is job one. Failing to do so can lead to costly penalties and interest charges, as well as frustration.
“People are busy; they’re running a business and trying to grow a business,”
says John Kennedy, division president of Insperity Payroll Services. “Let’s say it’s the 15th of the month and you’re swamped. You’re out on three calls with customers, you have a fire drill you have to do, then it’s the end of the day and you’ve now missed your window to make that deposit, incurring a penalty.”
By using an automated payroll processing system, this oversight can easily be avoided. Marking up – and sticking to – a calendar with all of the year’s deadlines is another helpful tactic.
Missing tax deposits and
filing deadlines
1
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Failing to keep up with
changing payroll regulations
2
No matter the level of government, tax laws and regulations can change often – and without notice. Staying in the know can be difficult, especially for smaller businesses, but it can save you time and money.
“With an automated tax update service, a business owner can reach out to multiple tax bureaus for guidance on changes in tax law,” Kennedy says.
“Online payroll processing, for the most part, can also help with that.
“The mom-and-pop companies can often miss these kinds of changes without a subscription to something like the Bureau of National Affairs or by checking the IRS and state websites – all while running the rest of the business.”
Less-than-stellar data entry
3
The mismatching of employee names and Social Security numbers is so rampant among employers that the Social Security Administration (SSA) has established a special phone number for verification purposes.
An incorrect filing with the SSA can impact an employee’s future retirement. Additionally, failing to keep an accurate account of employee hours can distort payroll records and lead to costly penalties.
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Discarding payroll records
prematurely
4
Depending on which government agency you’re dealing with, payroll information must be stored for a specific period of time.
Documents such as timesheets, canceled checks and W-4 forms should be retained for four to six years. If you’re audited, failing to produce the requested documentation can lead to fines.
“Typically, the penalty would be a certain amount of money per employee for whom you didn’t have the proper information,” says Kennedy. “Those fines can stack up quickly.”
Misclassifying employees
5
Not understanding the difference between exempt employees, non-exempt employees and independent contractors can lead to misrepresentations in reporting income and withholding taxes, as well as the mishandling of overtime.
A rise in the number of independent contractors, such as temporary workers and consultants, makes knowing the difference even more important. These workers, who receive $600 or more in compensation during a given year, expect to be sent their 1099 form by Jan. 31 of the following year.
The Fair Labor Standards Act contains guidelines to help you figure out the category in which your employees belong and stave off any potential oversight.
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Having the correct information is crucial
when processing payroll, but knowing what
to do with it is just as important. The second
installment of this guide will unveil five
more payroll missteps and outline a course
of preventative action for each.
Stay tuned.
... 6 , 7 , 8 , 9 , 10
InsperityTM, a trusted advisor to America’s best businesses for more than 25 years, provides an array of human resources and business solutions designed to help improve business performance. Insperity Business Performance Advisors offer the most comprehensive Workforce OptimizationTM solution in the marketplace that delivers administrative relief, better benefits, reduced liabilities and a systematic way to improve productivity. Additional offerings include Human Capital Management, Payroll Services, Time and Attendance, Performance Management, Organizational Planning, Recruiting Services, Employment Screening, Financial Services, Expense Management, Retirement Services and Insurance Services.
To find out more or learn how
Insperity can help your company,
call us at 800-465-3800.
Visit us at insperity.com.
About
Insperity
The information contained in this document is for general, informational purposes only and is not intended to be legal advice. This information is not a substitute for the guidance of a professional and should not be relied upon in reference to any specific situation without first seeking the advice of a qualified HR professional and/or legal counsel regarding applicable federal, state or local laws. Insperity and its employees make no warranties, express or implied, and make no judgments regarding the accuracy of this content and/or its applicability to a specific situation. A reference or link to another website is not an endorsement of that site or service.
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